Results-based financing (RBF):

Transcription

1 Results-based financing (RBF):. A Market Development Mechanism for Improved Cooking Technologies Asia Clean Energy Forum, Manila Christian Liedtke, 10 th June 2016

2 Energising Development (EnDev) EnDev is a partnership programme between: Netherlands, Germany, Norway, Great Britain, Australia, Switzerland, Sweden Co-financed by EU and Irish Aid Objective : provide at least 19 million people with access to energy in a sustainable manner by 2019 (Phase 1: , Phase 2: ) Current Budget: 290 million EUR Implementing organisation: GIZ in cooperation with Dutch RVO and other internationally operating organisations Maket-based Approach: Establishing economically sustainable energy solutions and distribution schemes

3 Regional Distribution of EnDev Projects 25 countries 15 Africa, 6 Asia, 4 Latin America Solar Hydro Biogas Cooking energy Grid extension/ densification Bolivia Honduras Nicaragua Peru Benin Burkina Faso Liberia Mali Ghana Senegal Burundi Ethiopia Kenya Madagascar Malawi Mozambique Rwanda Tanzania Uganda Bangladesh Cambodia Indonesia Laos Nepal Vietnam 3 3

4 EnDev Impacts within 10 years 15.5 million people with access to modern energy 1.7 million tonnes CO 2 e saved per year 34,000 SMEs were supplied with energy 17,800 soziale institutions were supplied with energy 37,000 producers, retailers and technicians for cookstoves trained 4

5 RBF for cooking technologies A new approach Payment by results principle (e.g. applied in health sector) transferred to cookstove market Concept & key principles Overcome market barriers through contractual agreements with private companies by paying incentives after verification of pre-agreed results Enable private sector delivery of modern energy services to the poor 1. Payments to a recipient on achievement of pre-agreed results 2. Recipient is given freedom as to how results are achieved 3. Independent verification of results functions as trigger for disbursement 5

6 RBF for cooking technologies A new approach Implementation started recently (mainly 2015) Total budget committed in projects: EUR 46,793,000 Timeframe for project set-up & implementation: 4 years Solar (6) Cookstoves (6) Mini-grids (2) Street lights (1) Gasifier stoves (1) Domestic biogas (2) Solar Water Heaters (1) Solar Water Pumping (1) Grid connections (1) Technologies Countries Africa: Benin, Ethiopia, Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda Asia: Banglades,, Cambodia, Laos, Nepal, Vietnam South America: Peru 6

7 RBF Project Design Design principles EnDev: Project set up, management, TA, Monitoring Private Sector: Accreditation for RbF and delivery of results Independent Verifier: Checks if output has been achieved Financial Institution: releases incentives reporting, Financial institution incentives products End consumers EnDev country project auditing, payments reporting Private delivery chain, e.g. Importers Wholesalers Distributors Credit companies/mfi payment Independent verifier checking checking reporting 7

8 RBF projects in the cooking sector Country Objective Bottleneck RBF design Ethiopia Peru Kenya Mekong (Cambodia, Lao, Vietnam) Connect urban production to rural distribution via cooperatives Design and market introduction of portable stoves Strengthening market for tier 2 and higher stoves Introduction of higher tier stoves to the region Transport and distribution costs and risks too high No portable stoves available in the Peruvian market Consumer financing constraints, absence of affordable credit mechanisms Manufacturers hesitant to enter new market, no connection with local distribution market Incentives per stove to cooperatives to invest in profitable distribution chain Innovation contest for design of portable stoves. Winning stoves brought to market Incentives for FI/MFI per loan extended to household purchasing stove, securing stoves loan product in MFI/FI standard portfolio Stove auction with increasing min. price and connecting manufacturers to national distribution agents 8

9 Stove Auction Mekong Snapshot TITLE: Market Acceleration of Advanced Clean Cookstoves in the Greater Mekong Sub-region (Cambodia, Laos and Vietnam) DURATION: 4 years - March 2015 to March 2019 BUDGET: EUR 3,839,704 Management and TA = EUR 767,704 (cannot exceed 20% of total budget) RBF incentives = EUR 3,072,000 (80% of total budget) OBJECTIVE: Accelerate market for advanced biomass stoves which are cleaner and safer than other biomass stove alternatives Increase number of actors in the market Improve access to cleaner and more efficient energy services for end-users 9

10 Stove Auction Mekong - Concept HOW IT WORKS Like in every auction there are Sellers and Buyers. The Sellers in The Stove Auction are stove producers or their agents and the Buyers are locally based stove distributors and retailers. Sellers consign their stoves to The Stove Auction located in Phnom Penh, Vientiane and Hanoi to sell to Buyers. BENEFITS FOR SELLERS Guaranteed prices backed by an RBF mechanism for stoves that are auctioned Early, low cost entry into new markets in Southeast Asia Access to incentivised distribution channels facilitated by The Stove Auction BENEFITS FOR BUYERS Access to high quality products at competitive prices Can purchase in affordable quantities Receive a cash incentive for each sale to an end customer 10

11 Dynamic market valuation of RBF incentive to seller Guarantee price to the supplier of stoves Economy of scales = less profit/unit & lower landing costs allows to bring down guarantee price Lower RBF Incentive Increasing demand = competition = higher bids Auction price for the distributer No sales EnDev/SNV Increasing the reserve price over time Reserve price (minimum acceptable offer) 11

12 Verification RBF payments to Sellers: paid once their stoves are sold at auction and the transaction has been independently verified. RBF payments to Buyers: paid once their stoves have been sold to end-user and that transaction has been verified through phone calls and physical inspections by the IVA. Transaction records that Buyers would need to submit to claim RBF are: Full customer contact info Serial numbers are recorded All registration cards are included RBF Claim calculations are correct RBF claims by Buyers will be deemed to have failed when more than 20% of claims (inspected both onsite and via phone) prove false. 12

13 Lessons Learnd RBF works best if embedded in a larger market development effort (RBF should not be an exclusive instrument) Considerable TA-efforts for project set-up (selection of, and CD for, partners) and monitoring necessary Don't design RBF overly complicated: rules of delivery and payment need to be clear Take financial cycles of companies into account (quick verification and disbursement of incentive; pre-financing might be necessary) Take-up of RBF by private sectors grows very slowly at beginning Financial institutions engage only slowly: unclear business proposition, and unfamiliar with role of project manager DD.MM.YY - Name of presentation 13

14 Thank you for your attention Contact: Funded by: Implemented by: 14

15 Pilot phase Cambodia SNV has been piloting The Stove Auction first in Cambodia prior to thirdparty implementation The first auction was March 31, and subsequent auctions on April 21, May 11 and May 26. Two auctions per week are scheduled. Currently there are two stove models auctioned so far (ACE 1 and Prime Fuelwood), with others waiting to be shipped ad others in the pipeline undergoing approval. With the first four auctions, 980 stoves have been sold. The clearing price has already slowly been going up as well has highest bids. SNV is currently mobilising Buyers to register for The Stove Auction, with a target of at least 15 by September 2016 in Cambodia. Currently there are 8 registered bidders in the Cambodia auction. 15

16 Key performance indicators 16